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Cancelling a matched sold transaction after picking "average cost"

EmKayEmKay Member ✭✭
edited May 2018 in Investing (Windows)
When I "accept" a downloaded SOLD transaction from my Traditional IRA, it asks me what kind of cost basis method I want to use:  average cost, or lot identification.

When I pick average cost (because that is the only method that Vanguard offers for my IRA), I get a Quicken warning window that says, "Keep in mind:  The IRS restricts when you can switch between methods ... Click Help for more information.  When you switch to average cost, Quicken will discard lot identification associated with previous sales of this security.  Click Help for more information...  This process may take several minutes. "  

The choices offered on this window are OK, Cancel and Help.

When I click Cancel - the transaction match is ACCEPTED, not cancelled.  What, exactly, does the Cancel button do (vs the OK button) ?

Comments

  • q_lurkerq_lurker SuperUser ✭✭✭✭✭
    edited May 2018
    Let's back up on your question to begin with --- 
    In Quicken, for each (mutual fund) security, you identify if that mutual fund is supposed to use Average Cost (box checked) or By Lot (box not checked) throughout this Quicken file for all time for all accounts.  

    image

    If you manually enter sale transactions and have the box checked, you will not see the option to specify lots for this sale.  If you do not have the box checked, for the sale you will have the option to specify lots, or Quicken will default to selling the first shares bought (FIFO = first in, first out).  All is well and good for manually entered transactions.

    Because that check box applies to all (Quicken) times and transactions in this file, if you check or uncheck that box with transactions already in place, Quicken will go back through time and alter the history accordingly.  That is usually not good from your side or from the IRS side as historical capital gains and thus also future capital gains can be affected by that change to that one box.  Thus, when you change that check box, the same cautionary note you cite about time and the IRS appears.  The change may take time to process and the IRS may not like it (allow it).    

    If you download transactions, the flow is not so clean as you have seen and you may get the pop-up question you cite (Avg Cost or by lot)  as you accept the downloaded transactions.  IF there is only one lot from which the shares can be sold OR IF you are selling all the shares in this account, then the pop-up does NOT appear (Quicken knows the right answer).  Otherwise (you are selling less than the entire holding in this account and there are multiple lots available), Quicken cannot be 'sure' what to do and this pop-up question appears.

    Now in reality, the question is inappropriate.  If the security is not a mutual fund or does not have the Average Cost box checked, Average cost should not be an option.  If the security is a mutual fund with that box checked, Lot specification should not be an option.  But the question has been popping up for a long, long time in version after version.  (footnote)  

    What is the user to do?
    I suggest you choose the pop-up answer consistent with the way you have the security set up.  Average cost if the security is set up as Average cost, otherwise not.   Further note that if the security is not Average Cost and you are satisfied with a FIFO sales definition, you do not need to select either box.  You can Click the OK (or similar selection) and let Quicken default to the FIFO option.  There is no need to further define the lot selection.  

    This bypasses your point about Vanguard using the Average Cost.  If that is so, and you cannot use the Average Cost selection in Quicken (in particular because you might own this fund in other accounts where you are not using average cost), then you will be faced with not having your data in Quicken match up with your data at Vanguard.  For an IRA account where cost basis is not an issue, this mis-match will not be important.  The mis-match could be a problem in other situations. 

    In direct answer to your question (finally), it would appear the "Cancel' option is cancelling the Average Cost selection you chose and reverting the selection to a FIFO lot specification.  The OK selection would (I presume) go through all the machinations to make that security Average cost for all accounts for all transactions.  

    Long answer to a short question.  
    __________________
    (footnote:  In my real world file where I download transactions, I do not have any mutual funds set to use average cost.  Thus I am presuming that this problematic question does appear regardless of the check box status for Average Cost.  It may be that the question does not appear if Average Cost is checked.)
  • EmKayEmKay Member ✭✭
    edited January 2018
    Sorry for the delayed 'thanks,' but THANKS.  Because my Vanguard retirement funds were opened after sometime in 2011, they are all REQUIRED to use average cost.  All of my investments are with Vanguard.  I went into each security and marked any that were not already marked 'average' thusly, and I now get the selection box, but not the confusing warning.  I appreciate the thoughtful and helpful answer!
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